EUR/USD reverses early gains as US Dollar recovers amid tariff delay

EUR/USD Faces Volatility as US Dollar Rebounds After Tariff Delay

EUR/USD reversed its early gains on Monday, slipping from a session high of 1.1425 to around 1.1375 in European morning trading. The drop was largely driven by a rebound in the US Dollar, with the US Dollar Index (DXY) climbing back to near 99.00 after initially falling.

The US Dollar’s recovery reflects ongoing market uncertainty fueled by inconsistent messages from Washington regarding trade policy. Over the weekend, US President Donald Trump announced a postponement of the planned 50% tariffs on European Union (EU) imports, pushing the effective date from June 1 to July 9. This decision followed a positive phone call between Trump and European Commission President Ursula von der Leyen. Von der Leyen expressed optimism about accelerating trade talks and highlighted the EU’s willingness to “pursue talks rapidly and vigorously” but emphasized that the extra time was needed to “conclude a good deal.”

Despite the temporary easing of trade tensions, market participants remain cautious as the credibility of the US Dollar is under pressure due to the unpredictable trade policies. Adding to the euro’s early strength, updated economic data showed Germany’s economy grew at a solid pace of 0.4% in Q1, supporting the single currency before the Dollar’s resurgence.

Overall, EUR/USD’s movement reflects the tug-of-war between improving European economic signals and the US Dollar’s safe-haven appeal amid ongoing geopolitical and fiscal uncertainties. Traders will be closely watching the upcoming trade negotiations and US fiscal developments to gauge the currency pair’s direction in the near term.